Author: CA Tarannum Khatri

Clubbing provision for income of minor child

Q. is clubbing provision applicable for income of children? Ans. Yes, if asset is transferred without adequate consideration to minor child (not minor married daughter) , the income arising from that asset will be clubbed with income of transferor. There is also another provision under section 64(1A). According to this section, income arising to minor child shall be clubbed with income of parent. Q. will income be clubbed with father’s income? Ans. When marriage of parents subsists, Income will be clubbed with the income of parent whose total income, excluding the income to be clubbed, is greater. If marriage of parent does not subsist, income will be clubbed with the parent who maintains the minor child in the previous year. Once income is clubbed, it will not be clubbed with other parent in next year. If assessing officer is satisfied with changing the option, he allows clubbing the income with other parent after giving opportunity to be heard. Q. is there any exemption for clubbing of minor child’s income? Ans. There is exemption up to Rs. 1,500 for each minor child. Q.Is there any exemption available for income of minor married daughter? Ans. No, there is no exemption u/s 64 (1A). Q. Is there any income on which clubbing provision will not apply? Ans. Yes, following incomes will not be clubbed with parent’s income. Activity which requires special skill,...

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Know about clubbing provision of income tax by FAQ

  Q.  Why is there need of clubbing? A. Sometimes to reduce the tax burden the taxpayer transfers the asset to another person. In this case, to protect the interest of revenue, the income derived by that asset will be clubbed in the income of transferor. This is called clubbing of income. Q.Which sections are covering clubbing provision? A.Section 60 to section 65 of income tax act covers the provisions of clubbing. Q.If I transfer the rent without transferring house to my wife, will it be clubbed with my income? A. Yes, According to section 60, When income is transferred without transfer of asset, it is deemed to income of transferor. Q. When I transfer some asset by revocable transfer, will clubbing provision apply for income from that asset? A. Yes, as per section 61, When some person transferred asset to another person which can be revoked (cancelled), any income arising from the asset will be clubbed with the income of transferor. Example: If Raj Kumar transfers his office to his wife by agreement mentioning that the asset can be re transferred any time to Raj Kumar, the income arisen from the rent of office is deemed income of Raj Kumar. Definition of transfer and revocable transfer: Transfer is deemed to be revocable if it contains any provision for the re transfer of the whole or any part of...

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Medical expenses and tax under salary head

In salary head, there are many elements. One is medical expenses’ reimbursement. yes, medical expenses are done by employee and bill is paid by employer. In this case, what will be tax implications? Read it in this post. Tax on Medical expenses when bill is paid by employer: First, understand one thing that medical reimbursement is not medical allowance. Both are different things. Medical allowance is fixed amount the employee gets per year from employer. While medical reimbursement is the one which the employer reimburses the employee which the employee has incurred for his or his relatives’ medical treatment. Tax treatment: (section 17(2))Fixed Medical Allowances: Always taxable. Medical facility: If provided in any hospital maintained by the employer. : fully exempt If any sum paid by employer for medical treatment of employee or his family member in the hospital maintained by the government, local authority, in hospital approved under central government health scheme or state government health scheme. : fully exempt If any sum paid by employer for medical treatment of employee or his family member in the hospital approved by the chief commissioner for prescribed diseases or ailments : fully exempt. To claim above exemption, the employee has to show receipt of payment and certificate from the hospital specifying the disease or ailment for which medical treatment was required. If employer has paid group insurance premium for employees...

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Tax treatment of investment in NSC certificates

National saving certificates are issued by  department of post. It is very safe way of investment. It does not give you safety from inflation but when inflation rate is lower than interest rate, it can give you benefit. It also helps you to save tax .  Who can buy NSC? Only residential individual can buy NSC. Joint account is also available. NSC can be purchased for minimum Rs. 100.The investment can be for denomination  of Rs. 100, Rs. 500, Rs. 1000 and Rs. 5000. Tax treatment: Deduction u/s 80C is available for invested amount.  When interest is accrued to NSC, deduction u/s 80C is available for it also. You should show the interest in NSC in the income tax head – income from other sources and claim deduction u/s 80C. But the total deduction for invested amount and interest accrued should not be more than Rs. 1,00,000 because The maximum deduction allowed u/s 80C is Rs. 1,00,000. So if you have invested Rs. 1,00,000 in NSC, whole interest accrued is taxable. When the term of NSC ends, you will get principal amount with interest. At that time, principal amount is not taxable because it is your capital which is returned to you. But interest amount will be taxable. year NSC purchased Other investment u/s 80C Interest accrued Maturity of NSC with interest Deduction u/s 80C Taxable amount 2011-12 80,000...

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Save tax on sell of house property by sec 54

 Long term capital gain is taxed at 20%.The rate is high and as a taxpayer or professional, you should be aware of saving long term capital gain by using sec 54. Here I have tried to explain main points of section 54 through questions and answers. Who can claim deduction u/s 54? Only individual and HUF can take benefit of section 54.. For which transaction exemption u/s  54 is allowed? Section 54 can help to save the tax when any residential house is transferred and the asset should be long term asset. It means that you have owned the residential house for more than 3 years from the date of transfer. Which asset should be purchased? You have to purchase another residential house within 1 year before the date of transfer or within 2 years after the transfer. The deduction is also available if you construct the residential house within 3 years from the date of transfer.Cost of plot can be included as cost of new residential house. How much exemption is allowed? Exemption is allowed up to the least of following: cost of the new residential house capital gain. What if you purchase or construct two new residential houses? The exemption is available to only one unit. But you can choose for which house you are seeking exemption. Obviously, you will choose the house which has more cost....

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